Team profile: Thames River Capital looks to the future

Thames River has come a long way since its inception in 1998 when chief executive Charlie Porter founded the business with Jonathan Hughes-Morgan, Michael Mabbutt and Bernt Tallaksen as an absolute returns focused boutique.

This year alone the group has seen gross inflows of $3.8 billion (£1.9 billion). It has also launched a long-only multi-manager operation for newly hired Gary Potter and Robert Burdett and has seen its hedge fund of funds business burgeon under Ken Kinsey-Quick, with two recent successful C-share issues.

Two new European funds have also just been launched for Gavin Corr, who was poached from BlackRock MLIM earlier in the year, under Thames River’s subsidiary limited liability partnership, Nevsky Capital.

With total assets under management now running to $11.9 billion and a payroll of 148 people, the focus remains firmly on the investment professionals who still account for over half of all staff.

Investment director Mike Warren, who joined the boutique at the start of the year to drive sales and marketing, says: ‘When you walk in the door you can smell the boutique culture. The first thing we think of in the morning is investment and there are 80 people thinking about stocks, bonds and equities.’

The lack of bureaucracy at the Berkeley Square-based boutique clearly appeals to Warren who found his previous roles at larger firms would often divert him away from looking after the day-to-day business.

Warren describes his arrival at the same time as Credit Suisse’s multi-manager heads Potter and Burdett as a ‘happy coincidence.’

Attracting the five-strong team was a coup for the boutique and establishing the team, which opened for business in October, has been a priority for Warren.

Chief executive Charlie Porter says: ‘The Gary and Rob campaign has worked well so far as our brand has not been that well known in the retail market. In the first month we have seen money coming in every day but multi-manager is a slow burn and the acid test will be whether we are still seeing daily deals in February and March.’

Porter is clearly proud of attracting well-known names to Thames River and describes his role at the group as similar to an ‘overpaid nanny.’

‘I remove all the rubbish our fund managers don’t want to deal with,’ he says.Other recent high profile captures include Bill Muysken, former head of pensions and financials at Mercer Investment Consulting to the fund of hedge funds team.

Porter says: ‘Every year I set out five or six things I want to achieve, but the first one is always to maintain the culture.’

Porter adds the group’s recruitment mantra is to employ ‘sensible, pragmatic people we like and trust’.

He claims Thames River has never lost a senior fund manager to another organisation and has sacked just three people.

In each case, he says it was ‘not that they were bad at their jobs, but because they were prize s***s!’

Warren clearly taps into Porter’s belief in putting the fund managers first. ‘Without our investment managers we are nothing. They are the magicians of our business.’

This is reflected in the lucrative deals put in place for star managers. Potter and Burdett sit in their own limited liability partnership and control around half the equity.

Kinsey-Quick heads the firm’s hedge fund business, running alternative fund of funds and individual hedge products since 2003. He has grown his team, which has an average age of 39, from three to eight over the last four years.

He says: ‘We do not believe in hiring trainees as we don’t have the time or the resources. We need to spend 100% of our time focusing on performance.

‘Training is distracting, as are committee meetings, so we just have one 30 minute meeting on a Monday morning.’

He believes a team over 10 would be too big and says he has only lost one team member since he started.

He has since restructured Warrior into a more opportunistic fund of hedge funds vehicle.

Warrior was grown to €500 million before being soft-closed and then re-opened in September to raise a further $100 million.

A closed-ended version of Warrior, Hedge Fund Plus, raised over $160 million and a further $100 million through its latest C-share issue.

A nimble structure is essential to Kinsey-Quick. ‘We do not want to be the next $30 billion hedge fund and over the next year both Warrior funds and Hedge Plus will be soft-closed.’

The boutique has a 27-strong team in global equities with Corr’s addition, under the Nevsky Capital banner.

It has filled the gaps in its long-only equities offering with a Japanese equities team, an eight-strong property team, a global credit team under co-founders Bernt Tallaksen and Michael Mabbutt, and a global fixed team under Paul Thursby.

The only remaining space is for a UK long only equities team.

Porter says while 2007 has been all about bedding in Potter and Burdett’s business, recruiting a UK equity team will be a top priority for 2008.

Porter says: ‘We expect to get a UK team in by the third quarter of next year but the big shops are getting much better at locking people in because they are starting to realise it is fund managers, not management that is important.’

With a business that now encompasses hedge funds, fund of hedge funds as well as two investment trusts, Sigma and TR Property, Porter is creating a truly diversified business which he believes is crucial.

He says: ‘The more you spread your risk, the safer you are as a business.’Porter suggests hedge fund driven firms, which was Thames River’s origin, have been much quicker to adapt to the changes brought on by Ucits III.

He says the firm will never launch a 130/30 style fund because it is ‘flawed product run by many people who have not shorted a stock in their lives’ and is keen to stress that Thames River’s fund managers employ the multi-asset investment opportunities enabled by Ucits III to the full.

Whenever the UK team is recruited, like all other teams recruited, it will be given the chance to prove itself.

Porter’s eye for attracting talent and then giving it the best possible start at the boutique is one of the attractions of his rapidly expanding business.

He says: ‘The battle for talent is relentless and we are never gung-ho about our business.’

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